Morning Must-Read: Andrew White: Timothy Geithner’s Stress Test
Noted for Your Morning Procrastination for May 31, 2014

Things to Read on the Morning of May 31, 2014


  1. Giovanni Peri, Kevin Shih, and Chad Sparber: How highly educated immigrants raise native wages: "The canonical economic model, based on demand and supply, holds that, all else equal, an increase in labour supply should cause wages to fall.... [But the labour market is more complex than the market for typical goods. Adjustment mechanisms exist to allow natives and firms to respond to immigration without experiencing lower wages or fewer employment opportunities. Immigrants may also generate positive externalities that benefit native workers.... Native and foreign labour differ.... Immigrants possess a comparative advantage and specialise in STEM. Thus, we might expect that natives respond... inflows of highly educated immigrants cause natives switch to more communication-intensive occupations.... A rather simplistic estimate of the contribution of foreign-born STEM to productivity in the US can be calculated... 50% of US total factor productivity (TFP) growth in recent decades is attributable to scientists and engineers... college-educated STEM workers grew from 2.9% of total employment in 1990 to 3.7% of employment in 2010... foreign-born workers were responsible for 80% of this growth.... Roughly 40% of aggregate productivity growth may be due to foreign-born college-educated STEM workers..."

  2. Adam Posen: Kuroda's plan is working: "The Bank of Japan's policies over the last 14 months are a welcome return to sanity. Mainstream economists inside and outside Japan had been asking the BOJ to stand up against deflation for nearly two decades.... There are three important improvements that the BOJ has made to its monetary regime... buying long-duration government bonds... the statement of a clear, positive inflation target... how the BOJ reacts to shocks.... This new regime of accommodating positive price shocks, at least under the current circumstances, is an extremely powerful shift..."

  3. Greg Sargent: Morning Plum: Mitch McConnell effectively abandons Obamacare repeal: "Today we have a big break in the Case of the Pathologically Dissembling Senate Minority Leader. As you know, Mitch McConnell has been struggling to articulate his position on the Affordable Care Act, ever since he laughably declared that the fate of Kentucky Kynect — the state exchange that has signed up over 400,000 people for coverage and is more popular than the hated Obamacare — is 'unconnected' to his push to repeal the law.... Now, however, the McConnell campaign has issued a new statement to Post fact checker Glenn Kessler that... suggests he might largely retain the Medicaid expansion.... 'Medicaid existed before Obamacare and will exist if we are able to repeal it. Obamacare loosened eligibility requirements for Medicaid recipients, and in the process, helped find many who were already eligible but no enrolled.  These people would remain eligible even after a repeal. The federal government does allow states flexibility in setting requirements and Kentucky could be able to keep many of the newly enrolled in the program if we decided to'. Well, there you have it... Kentucky could keep people on the Medicaid expansion..."

  4. Steve Beshear: Gov. Beshear Slams McConnell: "If each of the over 421,000 people who signed up via “kynect” could grab 10 minutes of Sen. McConnell’s time to explain what health care coverage means for their families, and if the Senator had the endurance to listen 24/7, it would take eight years to hear from each enrollee. That’s longer than the entire new Senate term he says he deserves..."

Should Be Aware of:


  1. Jonathan Chait: Why Republicans Always Say ‘I’m Not a Scientist’: "Asked by reporters yesterday if he accepts the scientific consensus that greenhouse gas emissions contribute to global warming, John Boehner demurred on the curious but increasingly familiar grounds that he is not a scientist. 'Listen, I’m not qualified to debate the science over climate change', the House Speaker said. Boehner immediately turned the question to the killing of jobs that would result from any proposal to reduce greenhouse gas emissions, which he asserts with unwavering certainty. (On this question, Boehner is not held back by the fact that he is also not an economist.)... This particular demurral seems to be in vogue for the Grand Old Party.... It’s a strange form of reasoning. Very few of us are scientists, which is exactly why we tend to defer to scientific judgment.... Scientists... believe that chugging Liquid Drano is bad for your health, which is why, precisely because of my lack of scientific training, I hold off on the Drano Cocktails. 'I am not a scientist' makes sense as a way to resolve a tension within Republican politics.... [They might] concede that anthropogenic global warming is indeed real, but that any solution is simply too costly.... The trouble with the it’s-real-but-let’s do-nothing line is that might give offense to the kooks... the Glenn Becks, George Wills, and Wall Street Journal editorial page columnists of the world are out there fighting the good denier fight, and they don’t want to be undercut.... 'I’m not a scientist' allows Republicans to avoid conceding the legitimacy of climate science while also avoiding the political downside of openly branding themselves as haters..."

  2. Richard Clarke: Bush Administration Committed War Crimes: "Amy Goodman: "I think things that they authorized probably fall within the area of war crimes. Whether that would be productive or not, I think, is a discussion we could all have. But we have established procedures now with the International Criminal Court in The Hague, where people who take actions as serving presidents or prime ministers of countries have been indicted and have been tried. So the precedent is there to do that sort of thing. And I think we need to ask ourselves whether or not it would be useful to do that in the case of members of the Bush administration. It’s clear that things that the Bush administration did — in my mind, at least, it’s clear that some of the things they did were war crimes..."

  3. Tim Urban: The Fermi Paradox: "If we’re neither rare nor early, Group 1 thinkers conclude that The Great Filter must be in our future... something prevents life from going much further and reaching high intelligence in almost all cases—and we’re unlikely to be an exception... a regularly-occurring cataclysmic natural event... the possible inevitability that nearly all intelligent civilizations end up destroying themselves.... This is why Oxford University philosopher Nick Bostrom says that 'no news is good news'. The discovery of even simple life on Mars would be devastating, because it would cut out a number of potential Great Filters behind us. And if we were to find fossilized complex life on Mars, Bostrom says 'it would be by far the worst news ever printed on a newspaper cover', because it would mean The Great Filter is almost definitely ahead of us—ultimately dooming the species. Bostrom believes that when it comes to The Fermi Paradox, 'the silence of the night sky is golden'..."

  4. Doug J: It’s in the look they give you down their nose: "The most revelatory piece on Washington that I’ve ever read is Sally Quinn’s infamous “Village” piece. If you haven’t read it before, and you’re interested in American politics, drop what you’re doing and read it right now. Establishment media’s dudebro heh-indeedy response to Michael Kinsley’s ridiculous anti-Greenwald screed is almost as telling..."

Already-Noted Must-Reads:

  1. Thomas Piketty: Technical Appendix: Inequality of Capital Ownership Addendum: Response to FT: "This is a response to the criticisms... which I interpret as requests for additional information - that were published in the Financial Times on May 23 2014.... These criticisms only refer to the series reported in chapter 10 of my book “Capital in the 21st century”, and not to the other figures and tables presented in the other chapters.... Let me start by saying that the reason why I put all excel files on line, including all the detailed excel formulas about data constructions and adjustments, is precisely because I want to promote an open and transparent debate about these important and sensitive measurement issues. Let me also say that I certainly agree that available data sources on wealth inequality are much less systematic than what we have for income inequality.... My problem with the FT criticisms is twofold. First, I did not find the FT criticism particularly constructive. The FT suggests that I made mistakes and errors in my computations, which is simply wrong, as I show below. The corrections proposed by the FT to my series (and with which I disagree) are for the most part relatively minor, and do not affect the long run evolutions and my overall analysis, contrarily to what the FT suggests. Next, the FT corrections that are somewhat more important are based upon methodological choices that are quite debatable (to say the least). In particular, the FT simply chooses to ignore the Saez-Zucman 2014 study, which indicates a higher rise in top wealth shares in the United States during recent decades than what I report in my book (if anything, my book underestimates the rise in wealth inequality). Regarding Britain, the FT seems to put a lot of trust in self-reported wealth survey data that notoriously underestimates wealth inequality..."

  2. Mark Thoma: The Great Recession's "biggest policy mistake": "The balance sheets of financial institutions were also severely damaged as the assets they held lost value during the crash. Many of these institutions became illiquid and insolvent....The government's response was... TARP that helped to restore the balance sheets of financial institutions.... Banks had a tough time to be sure, but the bailout worked.... Households didn't get the same amount of help in large part due to the opposition of Geithner's Treasury. That's why I concur with Mian and Sufi that this is 'the biggest policy mistake of the Great Recession'. A policy that would have provided households with mortgage debt relief could have made a big difference to those trying to rebuild their balance sheets and eliminate debt.... Americans were forced to mostly rebuild on their own, and this is a primary cause of the ongoing, slow recovery. It would have still taken time to recover even if households had been helped the way banks were helped. A nation can't quickly dig out of a recession that's so deep--but it didn't have to take as long as it has."

  3. Ezra Klein: Obama’s management problem: "It's clear that Obama doesn't personally hold Shinseki responsible for the problems at the VA. Quite the opposite: he thinks he's a victim whose career is being sacrificed to help calm this storm. He's furious about the abuses themselves just as he was furious about the deficiencies in HealthCare.Gov. But he never quite seems to be furious at the managers he's appointed to run these bureaucracies."

  4. Andrew White: Book Review – Timothy Geithner’s Stress Test… only just worth the read…: "Oh, and one Dragon is laid to rest too.  It becomes clear that the US Government could have saved Lehman.  After all that hot air about how there were no rules allowing the Fed or Treasury to save Lehman, Geithner explains all the rule bending they did for everyone else ('exigent conditions').  They (whoever ‘they’ refers too) could have saved Lehman.  For a number of reasons partially explained in the book, ‘they’ didn’t..."